coindesk.com
Bitcoin marketplace Paxful pleaded guilty to a three-count criminal information on Tuesday, saying in court it helped criminals move funds and profit from illegal activity including prostitution, fraud and sanctions evasion.
A “criminal information” is a formal charging document used when a defendant waives indictment and agrees to plead guilty. In this case, Paxful admitted to violating the Travel Act by promoting illegal prostitution through interstate commerce, operating an unlicensed money transmitting business and failing to implement an anti-money laundering (AML) program, as required by the Bank Secrecy Act, the Department of Justice's Eastern District of California branch announced in a press release on Wednesday.
The DOJ said Paxful earned millions by turning a blind eye to crimes happening on its platform. From 2015 to 2019, Paxful processed nearly $3 billion in trades and collected over $29 million in fees. The company was also tied to Backpage, an online classified site known for illegal sex work. Investigators said nearly $17 million in bitcoin moved from Paxful to Backpage and a similar site, with Paxful profiting by at least $2.7 million.
Rather than prevent abuse, prosecutors said Paxful actively marketed its lack of identity checks and compliance controls to attract users looking to evade detection. The company didn’t report suspicious activity, falsified its compliance policies, and facilitated transfers from high-risk jurisdictions including Iran and North Korea.
While the DOJ determined Paxful’s criminal conduct warranted a $112.5 million penalty, that number was reduced to $4 million after prosecutors assessed the company’s current financial condition, the DOJ said.
“The defendant attracted its criminal clientele by promoting its lack of anti-money laundering controls and its deliberate decision not to identify its customers," said Acting Assistant Attorney General Matthew R. Galeotti in a statement.
The company will be sentenced in February 2026. Its former chief technology officer, Artur Schaback, also pleaded guilty last year to related AML violations. The case was part of a joint investigation by the DOJ, the IRS' Criminal Investigation division, Homeland Security Investigations and FinCEN.